eGain Announces Financial Results for the Second Fiscal Quarter Ended December 31, 2010

MOUNTAIN VIEW, CA--(Marketwire - February 7, 2011) - eGain Communications Corporation (OTCBB: EGAN)

Quarter Highlights
--  Total revenue up 14% from the comparable year-ago quarter
--  Recurring revenue up 22% from the comparable year-ago quarter
--  Cash flow from operations of $7.3 million for the first six months
--  Total cash and cash equivalents of $12.2 million at end of quarter

eGain Communications Corporation (OTCBB: EGAN), a leading provider of customer service and contact center software, today announced financial results for the second fiscal quarter ended December 31, 2010.

Total revenue for the second quarter of fiscal year 2011 was $9.5 million, an increase of 14% from the comparable year-ago quarter. License revenue for the second quarter of fiscal year 2011 was $2.7 million, an increase of 6% from the comparable year-ago quarter. Recurring revenue for the second quarter of fiscal year 2011 was $5.2 million, an increase of 22% from the comparable year-ago quarter. Professional services revenue for the second quarter of fiscal year 2011 was $1.6 million, an increase of 4% from the comparable year-ago quarter.

Gross margin for the second quarter of fiscal year 2011 was 71%, compared to 69% in the comparable year-ago quarter. Total operating costs and expenses for the second quarter of fiscal year 2011 were $5.0 million, an increase of 16% from the comparable year-ago quarter.

Net income for the second quarter of fiscal year 2011 was $1.0 million, or $0.05 per share on a basic and $0.04 on a diluted basis, compared to a net income of $1.1 million, or $0.05 per share on a basic and $0.04 on a diluted basis for the comparable year-ago quarter. Net income for the second quarter of fiscal year 2011 included stock-based compensation expense of $50,000 and interest and tax expense of $331,000, compared to stock-based compensation expense of $77,000 and interest and tax expense of $373,000 from the comparable year-ago quarter.

Total revenue for the six months ended December 31, 2010 was $22.6 million, an increase of 39% from the same period last year. License revenue for the six months ended December 31, 2010 was $10.0 million, an increase of 125% from the same period last year. Recurring revenue for the six months ended December 31, 2010 was $9.7 million, an increase of 17% from the same period last year. Professional services revenue for the six months ended December 31, 2010 was $2.8 million, a decrease of 20% from the same period last year.

Gross margin for the six months ended December 31, 2010 was 77%, compared to 69% in the same period last year. Total operating costs and expenses for the six months ended December 31, 2010 were $10.8 million, an increase of 23% from the same period last year.

Net income for the six months ended December 31, 2010 was $5.9 million, or $0.27 per share on a basic and $0.24 on a diluted basis, compared to a net income of $1.8 million, or $0.08 per share on a basic and diluted basis for the comparable year-ago quarter. Net income for the six months ended December 31, 2010 included stock-based compensation expense of $104,000 and interest and tax expense of $646,000, compared to stock-based compensation expense of $132,000 and interest and tax expense of $650,000 from the same period last year.

Total cash and cash equivalents were $12.2 million at December 31, 2010, compared to $5.7 million at June 30, 2010. Cash provided by operations was $7.3 million for the six months ended December 31, 2010, compared to cash provided by operations of $2.1 million for the same period last year. Days sales outstanding in receivables for the second quarter of fiscal year 2011 was 28 days, compared to 51 days for the comparable year-ago quarter. Deferred revenues totaled $7.0 million at December 31, 2010, compared to $5.1 million at June 30, 2010.

"We are pleased with our overall performance for the first half of this fiscal year," said Ashu Roy, eGain CEO. "Our revenue, bookings, profits and cash flow are all up significantly over the same period last year. We remain optimistic about our future prospects, and plan to continue investing in the business with the intent to accelerate our revenue growth and increase our market share."

Business Highlights

New Hosting and License Bookings(1)

--  New hosting and license bookings for the second quarter of fiscal year
    2011 were $5.4 million, an increase of 29% from the comparable year-ago
    quarter. Of the total new hosting and license bookings in the second
    quarter of fiscal year 2011, 44% were from new hosting bookings and 56%
    were from new license bookings, compared to 29% from new hosting
    bookings and 71% from new license bookings in the comparable year-ago
    quarter.
--  New hosting and license bookings for the six months ended December 31,
    2010 were $13.6 million, an increase of 62% from the same period last
    year. Of the total new hosting and license bookings for the six months
    ended December 31, 2010, 25% were from new hosting bookings and 75%
    were from new license bookings, compared to 38% from new hosting
    bookings and 62% from new license bookings in the same period last
    year.

New milestones, products and industry recognition

--  eGain was named again to Software Magazine's 500 list of the world's
    largest software and service providers, advancing by 49 slots in 2010,
    compared to 2009.
--  eGain introduced eGain Multisearch™, a unique all-in-one search
    capability. The technology combines federated search, multifaceted
    navigation and best-agent process expertise behind the ubiquitous
    search box for radically better findability and ease of use.

Customer Momentum

eGain continued to build new and expanded existing relationships with a wide range of enterprise customers during the second quarter of fiscal year 2011. Notable new or expanded customer relationships include:

--  A fortune 100 insurance company
--  One of the largest health insurers in the United States
--  A leading full-service outsourcing provider to the global financial
    industry
--  One of the largest combination natural gas and electric utilities in
    the United States
--  A leader in the global hospitality industry
--  A multinational telecommunications group
--  One of the largest grocery retailers in the United States

Guidance

We are raising our revenue guidance for fiscal year 2011. For fiscal year 2011 we currently expect a year-over-year increase in total revenue of between 25% and 30% up from the previously provided range of between 20% and 25%. In addition, we currently expect to be profitable on an operating basis and generate positive cash flows from operations in fiscal year 2011 and plan to invest a significant portion of our anticipated top-line growth back into growing our distribution capability.

(1) We define New Hosting and License Bookings as new contractual commitments (excluding renewals) received by the company for the purchase of product licenses and hosting services. Such contracts are not cancelable for convenience but may be subject to termination by our customers for cause or breach of contract by us. Furthermore, because we offer a hybrid delivery model, the mix of new license and hosting business in a quarter could also have an impact on our revenue in a particular quarter. Due to effects that these trends have on our short-term revenue and profitability, we believe that it is useful to disclose New Hosting and License Bookings detail in this and future financial releases. We use this metric internally to focus management on the productivity of the sales team and period-to-period changes in our core business. Therefore, we believe that this information is meaningful and helpful in allowing individuals to better assess the ongoing nature of our core operations.

About eGain Communications Corporation

eGain (OTCBB: EGAN) is the leading provider of cloud and on-site customer interaction hub software. For over a decade, hundreds of the world's largest companies have relied on eGain to transform their traditional call centers, help desks, and web customer service operations into multichannel customer interaction hubs (CIHs). Based on the Power of One™, the concept of one unified platform for multichannel customer interaction and knowledge management, eGain solutions improve customer experience, optimize service processes end to end, increase sales, and enhance contact center performance.

Headquartered in Mountain View, California, eGain has operating presence in North America, EMEA and APAC. To learn more about us, visit www.eGain.com or call our offices: +1-800-821-4358 (US), +44-(0)-1753-464646 (EMEA), or +91-(0)-20-6608-9200 (APAC). Also, follow us on Twitter at http://twitter.com/egain and Facebook at http://www.facebook.com/eGain.

Cautionary Note Regarding Forward-Looking Statements

All statements in this release that involve eGain's forecasts (including the above stated guidance), beliefs, projections, expectations, including but not limited to our financial performance and guidance, plans to invest in our business and expectations regarding our products' performance, are forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements, which are based on information available to eGain at the time of this release, are not guarantees of future results; rather, they are subject to risks and uncertainties that may cause actual results to differ materially from those set forth in this release. These risks include, but are not limited to, the uncertainty of demand for eGain products, including our guidance regarding bookings and revenue; our expectations related to our operations; our ability to invest resources to improve our products and continue to innovate; our partnerships; our future markets; and other risks detailed from time to time in the Company's filings with the Securities and Exchange Commission, including the Company's annual report on Form 10-K filed on September 23, 2010, and the Company's quarterly reports on Form 10-Q. eGain assumes no obligation to update these forward-looking statements.

Note: eGain is a registered trademark, and the other eGain product and service names appearing in this release are trademarks or service marks, of eGain Communications Corp. All other company names and products are trademarks or registered trademarks of their respective companies.

                     eGain Communications Corporation
                        Consolidated Balance Sheets
                              (in thousands)
                                (unaudited)





                                                December 31,    June 30,
                                                    2010          2010
                                                ------------  ------------

ASSETS

Current assets:
  Cash and cash equivalents                     $     12,228  $      5,733
  Restricted cash                                         13            13
  Accounts receivable, net                             2,944         2,955
  Prepaid and other current assets                       619           512
                                                ------------  ------------
     Total current assets                             15,804         9,213

Property and equipment, net                              970           869
Goodwill, net                                          4,880         4,880
Other assets                                             882           354
                                                ------------  ------------
     Total assets                               $     22,536  $     15,316
                                                ============  ============

LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY

Current liabilities:
  Accounts payable                              $        792  $      1,146
  Accrued compensation                                 1,980         1,987
  Accrued liabilities                                  1,644         1,946
  Current portion of deferred revenue                  6,446         4,917
  Current portion of capital lease obligation             99           157
  Current portion of bank borrowings                      52           115
                                                ------------  ------------
     Total current liabilities                        11,013        10,268

Deferred revenue, net of current portion                 516           186
Capital lease obligation, net of current
 portion                                                  --            28
Related party notes payable                            9,282         8,724
Other long term liabilities                              269           273
                                                ------------  ------------
     Total liabilities                                21,080        19,479
                                                ------------  ------------

Stockholders' (deficit) equity:
  Common stock                                            22            22
  Additional paid-in capital                         323,545       323,700
  Notes receivable from stockholders                     (80)          (79)
  Accumulated other comprehensive loss                  (681)         (596)
  Accumulated deficit                               (321,350)     (327,210)
                                                ------------  ------------
     Total stockholders' (deficit) equity              1,456        (4,163)
                                                ------------  ------------
     Total liabilities and stockholders'
      (deficit) equity                          $     22,536  $     15,316
                                                ============  ============



                     eGain Communications Corporation
              Condensed Consolidated Statements of Operations
                 (in thousands, except per share amounts)
                                (unaudited)



                                    Three Months Ended   Six Months Ended
                                       December 31,        December 31,
                                    ------------------  ------------------
                                      2010      2009      2010      2009
                                    --------  --------  --------  --------

Revenue:
  License                           $  2,677  $  2,516  $ 10,037  $  4,470
  Recurring                            5,236     4,292     9,686     8,276
  Professional services                1,563     1,504     2,839     3,541
                                    --------  --------  --------  --------
    Total revenue                      9,476     8,312    22,562    16,287
  Cost of license                          7        83        21       151
  Cost of recurring                    1,288     1,129     2,521     2,281
  Cost of professional services        1,482     1,336     2,709     2,631
                                    --------  --------  --------  --------
    Gross profit                       6,699     5,764    17,311    11,224
                                    --------  --------  --------  --------

Operating costs and expenses:
  Research and development             1,343     1,285     2,757     2,455
  Sales and marketing                  2,916     2,350     6,430     4,784
  General and administrative             785       731     1,589     1,517
                                    --------  --------  --------  --------
    Total operating costs and
     expenses                          5,044     4,366    10,776     8,756
                                    --------  --------  --------  --------
Income from operations                 1,655     1,398     6,535     2,468
Interest expense, net                   (286)     (279)     (562)     (556)
Other income / (expense), net           (310)       36       (29)       30
                                    --------  --------  --------  --------
Income before income taxes             1,059     1,155     5,944     1,942
Provision for income taxes               (45)      (94)      (84)      (94)
                                    --------  --------  --------  --------
Net Income                          $  1,014  $  1,061  $  5,860  $  1,848
                                    ========  ========  ========  ========
Per share information:

  Basic net income per common share $   0.05  $   0.05  $   0.27  $   0.08
                                    ========  ========  ========  ========
  Diluted net income per common
   share                            $   0.04  $   0.04  $   0.24  $   0.08
                                    ========  ========  ========  ========

  Weighted average shares used in
   computing basic net income per
   common share                       22,031    22,205    22,078    22,209
                                    ========  ========  ========  ========
  Weighted average shares used in
   computing diluted net income per
   common share                       24,549    24,232    24,256    22,444
                                    ========  ========  ========  ========

Contact Information: Company Contact: Jamie Abayan 650-230-7532 PR@eGain.com CCG Investor Relations Contact: Kalle Ahl, CFA Account Manager 646-833-3417 kalle.ahl@ccgir.com